In late 2007, Centinela Hospital in Inglewood was losing nearly $1 million a month and had piled up $15 million in debt. Among the causes of the crisis: $25 million in overdue bills.

Collecting that money would have given Centinela a measure of relief. But the bills went unpaid, and the century-old medical center was sold. The new owners slashed services, closed half the operating rooms and laid off a third of the employees.

Who owed Centinela that elusive $25 million? According to hospital officials, it was health insurance companies.

"Insurers have found a very creative way of denying, delaying or slowing payments in a way that is having a real impact on patient care and some of our survival," said Von Crockett, Centinela's chief executive. "Every single doctor and hospital is writing off money they are legally owed but don't collect. It's an insane situation."

Doctors and hospital executives say collecting payments from insurers has become an expensive headache that is driving up the nation's healthcare costs.

Billing disputes and protracted payment delays are one consequence of a massive consolidation among health insurers that has created de facto monopolies in much of the country, the Los Angeles Times found.

Two decades ago, the top 10 insurers covered about 27% of all insured Americans. Today, four companies -- WellPoint Inc., UnitedHealth Group, Aetna Inc. and Cigna Corp. -- cover more than 85 million people, almost half of all those with private insurance.

A 2007 survey by the American Medical Assn. found that in two-thirds of metropolitan areas, one health insurer controlled at least 50% of the market. In the Los Angeles area, two companies dominate -- Kaiser Permanente and WellPoint's Anthem Blue Cross.

As a result, doctors and hospitals have little negotiating power and few options when an insurer rejects a bill. Some physicians are dropping out of insurance networks or turning away new patients. Others have moved to cash-only practices. Some smaller hospitals and solo-practice physicians say they are being driven out of business entirely.

The insurance industry lays much of the blame for billing problems on doctors and hospitals. Insurers question or reject claims "when we don't get full information or when we get duplicate bills," said Karen Ignagni, president of America's Health Insurance Plans, the industry's lobbying arm in Washington. "Efficiency is a two-way street."

In some cases, she said, insurers are simply trying to ensure that doctors treat patients consistently and in accordance with the highest medical standards -- that they're not wasting premium dollars by overusing costly treatments or ordering unnecessary tests.

"Utilization review is coming back," she said, referring to heightened scrutiny of doctors and hospitals. "You can't run a health plan today without using some of these tools and techniques" to control costs.

But Ignagni acknowledged that billing processes were inordinately complex. She said insurers were aware of providers' complaints and were trying to streamline billing systems.

"No question that administrative simplicity has to be job one," she said.

Reading the fine print in policies

Arcane and ever-changing coverage rules are a leading cause of fee disputes. Patients and physicians are compelled to pay special attention to the fine print in healthcare policies.

Dotti Smith, office manager for a group of surgeons affiliated with St. Mary's Hospital in Long Beach, recently billed a major insurance company for a gallbladder operation. The insurer had preauthorized the surgery and the surgeon was a member of the insurer's network of preferred physicians, Smith said. But the company refused to pay the $3,100 bill.

Why? The patient was enrolled in a subcategory of coverage with a smaller network of doctors that did not include the Long Beach surgeon.

The surgeon's office contacted the patient, who replied that the bill should be her insurer's responsibility.

Smith said the time she spends on billing issues has doubled over the last six years.

"It used to be a breeze," she said. "You'd bill Blue Cross or Blue Shield, and you'd get paid. Now you have to constantly stay ahead of the ball."

Doctors, nurses and other staff members are spending more and more time haggling with insurers over claims or obtaining advance approval for treatments.

Dr. John A. Glaspy, a UCLA oncologist, said that nurses who used to care for patients full time "now spend 40% of their 60- to 70-hour workweeks filling out forms and phoning for authorizations."

Walking through his office suite at UCLA Medical Plaza, Glaspy pointed to offices of clerks and medical assistants busy securing insurance approvals for even routine procedures.

"We have one employee just getting radiological approvals, eight to 10 a day," he said. "That's $45,000 in salary, plus benefits, not going to healthcare. It can take us a whole day just to find out who to get the authorization from."

Glaspy called the administrative burden an "incalculable" waste. "When patients sign up with an [insurance] company, they don't say, 'Find a doctor who's good at jumping through hoops.' "

More than 30 cents of every dollar spent on healthcare goes to administration, according to a 2007 survey of insurance and medical executives. That translates to about $630 billion this year. It is nearly twice the 16.7% spent on overhead in neighboring Canada.

In California, about 21% of private health spending goes to insurance paperwork, according to a 2005 report in the journal Health Affairs. That represents $26 billion a year.

"This is a substantial cost to the system . . . and, unfortunately, those dollars don't do anything to provide care to anyone," said Christopher G. Dawes, chief executive of the 264-bed Lucile Packard Children's Hospital in Palo Alto.

Dawes said the hospital employed "well over 100 people" working on billing and collections.

"And that doesn't really talk about the hidden costs, which is the actual delivery of care -- nurses, physicians and actual providers who are spending extra time on documenting to be sure they are paid for what we expect them to do," he said.

Patients caught in the middle

Patients are often dragged into the financial tug of war.

When their bills are rejected or reduced by insurers, doctors often try to recover unpaid balances from patients, even if the amounts exceed what they are responsible for paying under their insurance plans. This practice, known as "balance billing," is being scrutinized by regulators in several states -- including California, which recently banned the practice for emergency room care.

Francine Gair of Chico, Calif., got entangled in the billing wars after she tripped over her dog in June and broke her elbow. Three days later, doctors put a 4-inch metal plate in her arm. Gair, 62, a freelance writer, thought she was free and clear after paying the $4,000 deductible on her health plan. The surgeon and the outpatient center where the operation was performed were both in her Blue Shield of California network.

But even before she had her stitches removed, she was surprised to receive a $1,200 bill from the anesthesiologist. He informed her that he had dropped out of the network.

Gair says she should have been told this beforehand and is refusing to pay. Blue Shield is considering her appeal. Gair is holding off on follow-up surgery to remove the plate until the dispute is resolved.

"I think the whole system is messed up and needs to be changed," Gair said. "I regularly paid my insurance, but even when I had an accident I get stuck with a bill."

Physicians are fighting the insurance giants in court. In class-action lawsuits, thousands of doctors alleged that the nation's largest insurers, including WellPoint, Aetna, Cigna and Humana Inc., were involved in a "conspiracy. . . . to deny, delay and diminish payments to healthcare providers."

The suits accused insurers of systematic efforts to shortchange doctors, including reclassifying treatments to reduce payments, arbitrarily rejecting claims and purposely delaying reimbursements while earning interest on the money.

To settle the litigation, insurers set aside hundreds of millions of dollars to pay doctors who successfully challenge disputed bills in arbitration. WellPoint and Aetna alone committed $235 million to the recovery fund. Several smaller groups of doctors have similar lawsuits pending.

Insurer reimburses after being sued

Doctors and patients in New Jersey sued Woodland Hills-based Health Net Inc. over out-of-network fees. Without admitting liability, the insurer agreed to reimburse as many as 2 million people who complained of inadequate insurance payments from September 1997 through July 2007.

U.S. District Judge Faith Hochberg ruled that Health Net used a database that set out-of-network payments too low. Most health insurers use the same database, produced by Ingenix, a subsidiary of UnitedHealth Group. Doctors, patients' rights groups and some state regulators are trying to get the system overhauled.

In February, New York Atty. Gen. Andrew M. Cuomo announced that his office was investigating UnitedHealth and Ingenix. He accused them of cheating patients by using faulty data to reduce out-of-network payments. Cuomo said the case could affect 70% of Americans with private health insurance.

UnitedHealth defended the Ingenix data, saying it was "rigorously developed, geographically specific, comprehensive and organized using a transparent methodology that is very common in the healthcare industry."

The insurance industry has invested billions of dollars developing software for processing claims. The software, with 45 million separate codes for medical procedures, sifts claims for inflated charges, errors or inconsistencies that could provide grounds to deny or delay payment.

ecause most physicians use paper billing records, many say that challenging the insurers is like going into a gunfight with a butter knife. To even the odds, some doctors, clinics and hospitals are investing in software of their own or outsourcing their billing to national companies that aim to pool enough providers to match the insurance industry's muscle.

Companies such as Boston-based AthenaHealth and National Healthcare Exchange Services (NHXS) in Sacramento examine disputed charges to help doctors and hospitals support their original claims. The companies typically charge up to 10% of doctors' revenue.

NHXS, founded in 1999, represents 7,000 clients in 33 states. The company uses a database of insurer payment rules to analyze reimbursement patterns.

Mark Rieger, president of NHXS, said the data showed that insurers denied at least partial payment about 30% of the time on the first bill and ultimately denied appropriate payment in 6% of cases.

Insurers "are processing millions of claims a day," he said. "If they save a few dollars per claim, that's real money. They can say it's no big deal. But how often is your paycheck wrong? And if it was, would you allow it?"

In June, the American Medical Assn. released its first rating of insurers' billing patterns. It found that United Healthcare paid physicians the contracted fee 62% of the time, Aetna paid 71% of the time and Medicare paid 98% of the time.

The new owner of Centinela Hospital, a for-profit company called Prime Healthcare Services, has grown rapidly in Southern California by withdrawing from most private insurance networks. The company gets most of its patients through its emergency rooms and admits many for further care. Prime Healthcare then bills the patients' health plans at rates much higher than the insurers' negotiated rates for member hospitals.

Crockett, Centinela's CEO, defended this approach, which has sparked controversy and lawsuits. "What other choice do we have?" he asked. "Insurers have tied our hands."

Last fall, Dr. Michael Hurwitz, a general surgeon at Hoag Memorial Hospital Presbyterian in Newport Beach, dropped out of Anthem Blue Cross of California, a WellPoint subsidiary, after the insurer reduced reimbursements for his procedures by 30%. If he treats a Blue Cross patient at the hospital, he bills the patient directly.

Hurwitz, president-elect of the Orange County Medical Assn., said he had no choice.

"My bills go up 4% or 5% a year just to pay my staff, my rent, my malpractice insurance. All these continue to rise, but what am I getting back? The disproportionate advantage insurers have is astounding."

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